Auto loans are almost essential in today's world unless you have enough money to pay cash for a vehicle — which, of course, most people do not, especially when it's a new vehicle. But what if you have bad credit? Can you still get a loan even if your credit score is not up to snuff? This article provides some key tips for anyone with poor credit who might be looking to purchase a new vehicle with an auto loan.
Second Chance
If a poor credit score prevents you from getting a loan from a so-called "prime" lender, one good option is to apply for a loan with a "second chance" lender. These lenders are loan companies who are willing to lend money to borrowers that have a poor credit history. Of course, the terms are going to more challenging when you deal with a second chance lender. Because they are taking on a riskier loan, this type of lender will inevitably charge a higher interest rate than you would get if you had better credit. Many borrowers with bad credit are willing to pay this extra interest to be able to obtain a loan and purchase their desired vehicle.
Dealer Loan
Another option is to obtain your auto loan directly from the dealer. Some dealers are willing to provide the financing for the vehicles themselves rather than having the customer go through a third-party lender. Because the dealer wants you to purchase your new vehicle from their dealerships, they can be more likely to approve a loan for those with less-than-optimal credit scores.
Co-Signer
If you have a family member or close friend who is willing to help you get an auto loan, consider asking them to co-sign your loan. When a person co-signs a loan, they are taking responsibility for the loan being paid back in case anything prevents the borrower from paying it back themselves. This procedure often convinces lenders to grant loans they would otherwise reject.
One crucial point to remember regarding asking someone to co-sign an auto loan is that the co-signer must have good credit. If they have bad credit, then there's no reason to pursue this course of action, as the lender is almost certain to turn down the loan unless the co-signer has a better credit rating than the applicant.
Credit Union
Another possibility is to join a credit union and apply for a loan with them. Many credit unions will consider giving auto loans to members who have lower credit scores.
Contact a company that offers auto loan services to learn what types of loans will be available to you.
Share1 July 2019
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